More Job Offshoring, More Income Inequality

Negotiated in secret with hundreds of industry advisors, corporate-driven trade deals like the North American Free Trade Agreement (NAFTA) include special protections for businesses that offshore American jobs to low-wage countries.

The result is lower wages for all of us, not just those who lose a manufacturing job. Contrary to the theory of free trade, now broad losses in income caused by our trade policies pushing down wage levels outweigh the gains consumers get from cheaper imported products.

Today's "trade" agreement include investor protections that eliminate many of the usual risks that make firms think twice about moving to low-wage countries.

These incentives to offshore jobs have contributed to the net loss of nearly 50,000 American manufacturing facilities and nearly 4.5 million U.S. manufacturing jobs – one out of every four – in the era of corporate-rigged deals.

The U.S. Department of Labor lists 2,981,478 million workers as specifically losing their jobs to offshoring and competition from imported goods – and that is under just one narrow program that excludes many people whose job loss is trade-related.

Studies estimate that the U.S. economy could have supported 7 million more manufacturing jobs if not for our massive trade deficits. The trade deficit is a measure of how much more we buy from other countries versus sell to other countries.

When trade agreements include incentives to offshore jobs, U.S. firms shift production to low wage countries and then goods with U.S. brand names are imported back for sale here, exploding our trade deficit.

Income Inequality

This failed model of "trade" has also made U.S. income inequality worse. More and more of our country’s wealth is flowing to the richest Americans while our once mighty middle class is shrinking.

Trade policies determine what types of jobs – and wages - are available in an economy, not the total number of jobs. Failed trade deals have destroyed well-paid manufacturing jobs. Those workers must then compete for lower-paid service sector jobs that can’t be sent abroad. This pushes down wages in those sectors, spurring broad-based middle-class wage stagnation.

The U.S. Bureau of Labor Statistics reports that 40 percent of displaced manufacturing workers who were rehired in 2016 experienced a wage reduction – 25 percent losing more than 20 percent of their income.

Study after study has produced an academic consensus that our current trade policies have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame.

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